ASIA MARKETS: Japan Stocks Hit Multi-year Highs, Leading Asia

By V. Phani Kumar, MarketWatch

HONG KONG (MarketWatch) -- Japanese stocks on Monday jumped to their highest level in more than five years, boosted by an improved profit outlook and further yen weakness after the Group of Seven major economies refrained from criticizing Tokyo's easing policies.

The performance allowed the Japanese market to stand tall amid broad declines in other regional markets, following a report in The Wall Street Journal that Federal Reserve officials have mapped out a strategy to wind down a bond-buying program.

The drop also came amid caution ahead of the release of China's industrial-production and retail-sales data for April, due later in the day.

"The release of statistics this afternoon covering China's industrial production and retail sales for April has the potential to move world equity and commodity markets. Indications of moderating growth in China have been a key factor for markets in recent months," said CMC Markets chief market analyst Ric Spooner.

Japan's Nikkei Stock Average climbed 1% to 14,751.34 -- rising to levels it hadn't seen since January 2008 -- after having spiked 6.7% last week. The broader Topix index gained 1.4%.

Hong Kong's Hang Seng Index gave up 1.1%, while the Shanghai Composite shed 0.2% and Taiwan's Taiex dropped 0.4%.

South Korea's Kospi rose 0.1% and Australia's S&P/ASX 200 slipped 0.2% in choppy trade, with each changing direction several times.

G-7 help send Tokyo higher

The gains in Tokyo came after leaders at a G-7 meeting offered no criticism of Japan's monetary policies that have helped weaken the yen sharply in recent months. On Monday, the U.S. dollar (USDJPY) was trading close to the Yen102 level, further boosting shares of Japanese exporters.

Hopes for strong earnings also provided a tailwind, after the Nikkei newspaper reported over the weekend that listed non-financial companies were on track to post a 20% growth in pretax profits for the current financial year ending March 31, 2014.

Shares of Panasonic Corp. (PCRFY) soared 8.1%, and Nissan Motor Co. (NSANY) jumped 5.2%, after each issued strong annual profit forecasts. (Read more on Panasonic's and Nissan's results.)

Nippon Steel & Sumitomo Metal Corp. (NISTF) added 0.8% after it announced plans to cut costs, although the steel maker didn't provide a profit forecast.

Sharp Corp. (SHCAY) surged 10.4% after the Nikkei newspaper reported it planned to downsize its European operations.

Several commodity producers skidded across the region on the U.S. currency's (DXY) recent strength, which weighed on prices of dollar-denominated commodities.

In addition to extending its gains above the Yen100 level, the greenback also rose against other major currencies, with the euro (EURUSD) dropping under the $1.30-handle, while the Australian dollar (AUDUSD) traded close to parity.

The Journal report that the Fed may wind down its quantitative easing -- a key tailwind behind the global markets' rally in recent months -- also weighed on sentiment.

"Usually, the U.S. dollar would not benefit in times of improving risk appetite, but it is finding plenty of support from the fact that [Federal Reserve] policy is set to diverge with other central banks, with the currency breaking key levels against major currencies," said Crédit Agricole head of global markets research Mitul Kotecha.

"The surge in U.S. Treasury yields is underpinning the U.S. dollar, helped by firmer U.S. economic data, in particular on the jobs front," Kotecha said.

Gold miners were hit after the precious metal's futures dropped more than 2% on Friday.

In Sydney, shares of gold miners Newcrest Mining Ltd. (NCMGY) lost 4.5%, and Perseus Mining Ltd. shed 7.7%.

Likewise, stock in Zijin Mining Group Co. (601899.SH) lost 1% in Shanghai and 2.2% in Hong Kong.

Elsewhere in the resource sector, BHP Billiton Ltd. (BHP) was off 1.1%, and Rio Tinto Ltd. (RIO) gave up 1.9% in Sydney.

Shares of energy producer Cnooc Ltd. (CEO) tumbled 2.7% in Hong Kong, while PetroChina Co. (PTR) gave up 0.5% and Jiangxi Copper Co. (JIXAY) lost 1.7% in Shanghai. Energy major Inpex Corp. (IPXHF) tumbled 6.9% in Tokyo.

Shares of mainland Chinese banks dropped after central-bank data released Friday showed they cut back on lending in April from levels seen in March.

Bank of Communications Co. (BCMXY) fell 1.4%, and China Construction Bank Corp. (CICHY) dropped 2% in Hong Kong; their Shanghai-listed shares fell 1.1% and 0.4%, respectively.

Shares of Ping An Insurance Group Co. (PNGAY) slid 3.9% in Hong Kong and 1.6% in Shanghai after China's securities regulator banned its securities unit from underwriting new stock offers for three months, citing negligence as the cause.

Casino operator Galaxy Entertainment Group Ltd. (0027.HK) rose 1.2% on reports it will replace Esprit Holdings Ltd. (ESPGY) as a Hang Seng Index constituent next month. Esprit shares dropped 0.6%.

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